4 Mortgage Tips for Financing Overseas Properties

Eugenia Liew
4 Mortgage Tips for Financing Overseas Properties
A lot more Singaporeans have started considering buying overseas properties when the Government announced the increase of Additional Buyer’s Stamp Duty (ABSD) rates and the decrease in Loan-to-Value (LTV) rates for some residential property purchases back in 2018.
If you too are interested in purchasing an overseas property, whether it’s to relocate, to buy a retirement home, for holiday leisure, or you’re simply looking for a real estate investment outside the country, this article may help you with successfully financing your overseas property. We’ve listed some of the things you need to know below.

1. Make Sure to Check the Overseas Property Laws or Jurisdiction

First of all, you have to know if you’re even allowed to buy a property in the country you’re eyeing. Laws and jurisdiction are usually different for each country, and sometimes rules about foreigners buying properties also vary in their cities and provinces.
To give some examples, properties in Canada are regulated per province. There’s no restriction on the type and number of property that you can purchase, but you may be subject to their non-resident speculation tax (NRST).
On the other hand, there are some countries, like Japan, wherein the process of buying a property for foreigners is pretty much the same as how local citizens do it. They did, however, recently enact a Land Use Restriction Bill which prohibits foreigners from buying land in certain areas.
Meanwhile, if you’re planning to buy a property in the U.S., your taxes and other legal fees may vary depending on the state. In Australia, foreigners can also buy investment properties, but there are different rules and regulations surrounding the type of properties you can purchase.
Yet some other countries like Thailand require land to be held under a local citizen’s name, which may not be ideal, especially if the person isn’t a family member or someone you fully trust.
As you can see, different countries have different limitations when it comes to property ownership, so be sure to do your research before moving forward to applying for a loan. It would also be helpful to speak with a lawyer or local agent when exploring your options.

2. For Bank Loans from Singapore, Check your TDSR

Once you’ve decided where to buy your property abroad, you have to start thinking about paying for your purchase. One of your options is to apply for a mortgage in Singapore to finance the property.
To do that, you have to make sure that your Total Debt Servicing Ratio (TDSR) is eligible for the amount you’d like to loan. The TDSR is the portion of your gross monthly income that goes to repaying all your loans, including the loan you’re trying to apply for. Your TDSR should be less than or equal 60% of your monthly income.
Therefore, if taking up a new mortgage for your overseas property would push your TDSR beyond 60%, the banks in Singapore won’t approve your loan application. If this is the case, one of the things you can do is to pay off your existing debt (whether in part or full) to lower your TDSR. You can also sidestep the problem by seeking a more affordable property instead, or alternatively, seek financing options overseas, although that also comes with its own challenges which we’ll talk about below.
If you have an existing mortgage for an HDB flat or executive condo (EC), your Mortgage Servicing Ratio (MSR) also comes into play. It’s the portion of your gross monthly income that goes to property loan repayments, including the monthly repayments for the loan you’re trying to apply for. Be sure that your MSR won’t go beyond 30% your gross monthly income to be eligible.
We recommend that you consult one of PropertyGuru’s Home Finance Advisors to find out if you’re eligible to apply for a loan, to help you find the best lender based on your condition, or at least guide you in what you can do in case your TDSR and MSR go beyond the threshold.

3. For Bank Loans from Overseas Lenders, It’s Best to Have A Source of Income from There

While there are international banks who offer overseas mortgages to Singaporeans, not all banks and developers are comfortable in lending money to foreigners in general. This is why, if you plan to get a mortgage from overseas, it’s ideal to have a savings account open in the country where you’re hoping to get financing, or have a source of income from there as well. This may also help you avoid paying for exchange rates and/or additional costs for sending your funds abroad. At the same time, mortgage rules may also vary per country, so again, be sure to do your research accordingly.
For example, in Canada, your monthly housing cost (mortgage payments, utilities, etc.) must not exceed 30% of your gross monthly income, and the Canadian equivalent of your TDSR must not exceed 40% of your gross monthly income. As a foreign borrower, you’re only allowed an LTV of up to 65% of the purchase price of the property, so you’ll need to prepare a down payment of at least 35% of the purchase price.
Whichever country you plan to borrow in, you should expect some interviews and requests for documentation and information when processing your loan, and you should have done your homework before venturing to borrow there.

4. It’s Good to Be Familiar with and Monitor the Market

As you know, mortgage rates often move with the market forces. Hence, it’s best to stay updated with housing market trends and conditions, such as economic growth, inflation, and the like, in the financing country, as these may also directly affect your mortgage interest rates.
If you’re aiming for your first real estate investment abroad, it’s good to note that when countries build less homes and fewer homes are also offered for resale, the decline in home purchasing may lead to a decline in demand for mortgages as well. This may lower interest rates which may call for a good time to buy a property and apply for financing also.

Seek Professional Advice

Buying a property overseas may require more effort and paperwork than buying a property locally, but it may well be worth it.
If you already have a country and some property options in mind, and especially if you’ve decided to finance your property locally and are looking for the best mortgage package for your buy, please don’t hesitate to reach out to the Home Finance Advisors at PropertyGuru Finance for a careful and more comprehensive discussion about your home purchase.
Good luck!
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Disclaimer: The information is provided for general information only. PropertyGuru Pte Ltd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

More FAQs on Financing Overseas Property

Generally, yes! However, depending on your preferred country and your finances, your choices may be restricted by certain overseas laws and/or policies.

There is no Singapore tax when you buy property overseas. For example, the ABSD computation only factors in properties in Singapore. However, depending on the laws of the country where you're buying the property, you may need to pay taxes.

No. However, overseas properties are taken into account when buying HDB flats. You cannot buy an HDB flat if you own a property, whether locally or overseas.